Determinant factors of monetary policy in Malaysia / Azzirrah Rahman

In this research, its aim is to provide an empirical evidence of the determinant factor of monetary policy in Malaysia. This analysis uses a test of the sensitivity of lending rates towards monetary policy and other economic variable in Malaysia. In the other research done by Fazel Shokoofeh, journal of Humanomics, monetary policy can be seen not effective in the respects of mortgage rates which include investment and aggregate demand. Other than that, it also aims to examine the effectiveness of monetary policy on all sectors in the economy especially lending rates. Sample that being use in this project paper are taking from the population in Malaysia which is from 2000 until 2009. This research takes three types of variables which are based lending rates, inflation and money supply (M3). The tests used in this research are unit root test and log linear model. It will take in a form of natural log of simple and multiple regressions. The comparison will be done between non difference variable and difference variable. This research carries three hypotheses. The general conclusion support that based lending rate is not solely depending on the money supply and inflation but due to the omission of some other variables. This project paper is divided into five chapters. The first chapters will be introduction for my research. It is including background of study, problem statement, objectives of study, research questions, scope of study, limitations of study, significance of study and definitions of terms. The second chapter will be review about the previous study that also examines the main point of this research which is monetary policy, inflation and lending rate. This is to provide a better understanding about my research. The third chapter will be discussing about research methodology and design that use in this research. In this chapter, it will include theoretical framework, dependent variables, independent variables, data collection method, sample size, data processing and analysis, model specification, procedures for data analysis and multiple regression analysis.